LAST year markets had a terrible time. So far 2023 looks different. Many indices, including the Euro Stoxx 600, Hong Kong’s Hang Seng and a broad measure of emerging-market share prices, have seen their best start to the year in decades. America’s S&P 500 is up by 5 per cent. Since reaching its peak in October, the trade-weighted value of the dollar has fallen by 7 per cent, a sign that fear about the global economy is ebbing. Even bitcoin has had a good year. Not long ago it felt as though a global recession was nailed on. Now optimism is re-emerging.
“Hello lower gas prices, bye-bye recession,” cheered analysts at JPMorgan Chase, a bank, on Jan 18, in a report on the euro zone. Nomura, a bank, has revised its forecast of Britain’s forthcoming recession “to something less pernicious (than) what we originally expected”. Citigroup, another bank, said that “the probability of a full-blown global recession, in which growth in many countries turns down in tandem, is now roughly 30 per cent (in contrast with) the 50 per cent assessment that we maintained through the second half of last year”. These are crumbs: the world economy is weaker than at any point since the lockdowns of 2020. But investors will eat anything.
Forecasters are in part responding to real-time economic data. Despite talk of a global recession since at least last February, when Russia invaded Ukraine, these data have held up better than expected. Consider a weekly estimate of GDP from the OECD, a group of mostly rich countries which account for about 60 per cent of global output. It is hardly booming, but in mid-January few countries were struggling. Widely watched “purchasing-manager index” measures of global output rose slightly in January, consistent with GDP growth of about 2 per cent.